Riding the Float, Smartly? (for 1 month)

I am currently refinancing my house and I've run into a bit of a conundrum. Because my property tax is due in November, and my closing date got pushed into early November, I have to pay my $5,600 in property tax as part of my closing costs, while I wait a few weeks for my $6,100 escrow check to come back to me with the money that SHOULD have gone towards property tax.

 

I simply do not have enough in the budget to pay for this without riding the float for a few weeks, and putting expenses on my credit card with the knowledge that I will be paid before they come due. Normally I would budget this out of my e-fund, but I had a 2-week hospital/ICU stay this summer. Many thanks to YNAB for helping me overcome my medical bills, but that option is off the table.

 

So I'm stumped at how I should handle this within YNAB. If I could pay with CC, I would just budget +5600 to Mortgage, CC Payment Available would increase by 5600 which I would budget -5600 back out of to make it ~0 again, everything would be green, and then when I get the money, I would budget +5600 of it into CC payment. Since I have to pay through checking, my best thought is to do about the same, but this leaves me a big red -5600 on CC Payment.

 

Much of the advice I've seen has revolved around some variation of take money out of other categories, and then when you spend on the CC, don't budget that spending until you get the payment. Maybe I'm misunderstanding something, because while that keeps all the fields happy and green, that isn't budgeting anymore. I want to deposit that check, pay off the CC, and know I'm right back where I should be. No surprises that I overspent during my period of uncertainty.

 

The other option the bank gave was to postpone my closing, but my rate lock at 2.875% interest would expire, which is basically a non-starter.

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    • Vibrant
    • No more counting dollars, we'll be counting stars
    • vibrant
    • 1 mth ago
    • 1
    • Reported - view

    I think you're overthinking it. 

    You have to write a check for $5600(+). I assume you have $5600+ in your checking account, and therefore in your budget, just not in your property tax category. Move money from other categories until you have $5600 in the Tax category. Write check. 

    If you had $500 in, say, your grocery category and now you have $0 because you moved it to the Tax category, when you buy groceries with your CC, the grocery category will go yellow negative overspent. Rinse/repeat with your other day to day spending until you get your escrow check. 

    If the escrow check comes before the end of November, use it to cover the yellow overspending in all your categories. If it comes in December, budget directly to the CC category to make the available match the CC balance. 

    Like 1
    • Vibrant So if I get this approach right, it's:

      1) Cover the expense by zeroing other categories, e.g. Groceries.

      2) Spend whatever you spend in Groceries, and other categories.

      3) Allocate for whatever you spent after you get paid.

      What I don't understand is how we can call that "budgeting" because, during that limbo phase, there is absolutely NO control of spending in those categories. It seems to be a "spend indiscriminately and fix it later" stance. What happens if I get the escrow check only to find that I spent too much in the meantime? And suddenly I'm in credit card debt?

      This is the advice I've seen from YNAB employees too and I just don't get it. It's like as soon as you are forced to create debt, the system breaks down. At least with the "leave a category red" method, I can make sure that I don't overspend anything else in the meantime, so I know that when the check arrives I'll be good. Rule 3 still applies and overspending in groceries still has consequences.

      Like 1
    • Sorry I don't mean for that to sound as aggressive as it did, I'm just mildly frustrated at what I see as a limitation of the software and a hole in the method.

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    • Aquamarine Rhythm said:
      I don't understand is how we can call that "budgeting" because, during that limbo phase, there is absolutely NO control of spending in those categories.

      Actually, YNAB is telling you not to spend anything at all in those categories. In the typical case, inherent in YNAB's design, it's trying to get you to avoid debt increase. You're simply not in that typical situation, which is why the tool doesn't really work very well.

      It's only because of the extremely short timeframe -- in which you're able to avoid cash purchases -- that you are able to run your budget like this. Again, the big red category signifies missing cash. If it were longer, reallocating would definitely be the better option.

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  • If you make other budgeted purchases, the CC Payment category would have funds you could temporarily take. This is yet another reason not to pay your CC account to $0.

    The "official" way is to shift funds from other categories, so you know exactly where your remaining cash can be used. (Leave the cash-only expenses green.) It's also a lot of moving, just to move it back a week or so later.

    ASSUMING YOU CAN SURVIVE ON CREDIT AND YOUR REMAINING CASH UNTIL THE ESCROW REFUND ARRIVES, the pragmatic approach would be to leave the Property Tax category red. This avoids the busy work of the 2x shuffle from umteen categories.

    Basically, you do what millions of people do without YNAB. Put everything on the CC and trust that money will arrive in time. If you have cash in other accounts, use it to ensure checking doesn't overdraft.

    This is the kind of advice that would rake in the down votes in reddit. However, you have already stated you're going down this road regardless (i.e., not losing the lock).

    Given that, I just don't see the point of mucking about in the budget.

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      • dakinemaui
      • dakinemaui
      • 1 mth ago
      • 1
      • Reported - view

      You could also shift the red to the CC Payment category as you mentioned. That's actually better, because the amount your budget is it of whack -- the amount of red -- will decrease as you make purchases with the CC.

      Like 1
    • dakinemaui The "official" way sounds broken, see my thoughts above. I don't get how it doesn't simply remove your ability to budget?

      I appreciate the pragmatism, I think I've seen some of those Reddit threads... Frankly, even a small rate hike would magnify over the long run. Even if the money is late and I have to pay interest for a month, that's small potatoes in comparison. And I can already feel the downvotes rolling in from saying that...

      I'll learn to live with the red category and turn off notifications on my phone so it stops reminding me I have an overspent category.

      That's an interesting thought with the negative CC category becoming less inaccurate as I spend on it until it eventually turns green again. It's almost like saying, "I can make this budget work, only if I can put this many dollars on the card, rather than from cash" and the more I do, the more real that statement becomes.

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    • Aquamarine Rhythm said:
      I don't get how it doesn't simply remove your ability to budget

      The point of reallocating is to show you exactly what you can afford with cash. There are just some things that cannot be put on a CC, so those things should be left funded in the budget. After reallocation, if there is $0 in groceries, that is telling you you cannot buy any groceries with cash -- without impacting one or more of those cash-only expenses. Thus, if you want groceries, you WILL be incurring debt, and you MUST use your CC. It's about awareness of what your CASH can/cannot buy. That's the sole job of the budget.

      In your case, you obviously feel like you can survive until the refund arrives on credit. In other words, you have enough cash for cash-only things until then. (If you did reallocate, it should confirm that.)

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  • Aquamarine Rhythm said:
    It's almost like saying, "I can make this budget work, only if I can put this many dollars on the card, rather than from cash"

    Yep, that's exactly what it's saying. Running a negative CC Payment category is the typical way to ride extreme cases of CC float. The key to riding the float is you have to use the CC as much as possible, holding back your real cash for the purchases that cannot be put on a CC. You have to manage your cash supply on your own (without the budget), which most people actually manage to do fairly well in their "pre-YNAB" life.

    (The link is more for general edification and perhaps other users. You won't be applying that workflow.)

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  • ok, just to muddy the water I am going to suggest a different tack.  Write the cheque for the tax. The category will be overspent. Leave it that way. Use the rest of the categories in the normal way. Since you said your day to day spending is mostly on the credit card, not having the money in the bank to cover those expenses isn't an issue.  

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